Liquid democracy is a few seasons from the main stage, and even with the incumbent new houses violently waking up to the smelling salts this week, crypto twitter is still reporting out in front of the rulemakers. Godspeed, stay the course and innovate. It’s still early. A few comments regarding the policy landscape from the last few days.
- The GOOD, - Yesterday, Rep. Beyer introduced what is perhaps the most expansive and coordinated crypto framework yet in his Digital Asset Market Structure and Investor Protection Act. This would mandate agency coordination on deliberate timelines with approval of the Treasury for stablecoins going to market. Long term effect would be great for dollarization, power play in terms of keeping the petrodollar peg. Regulatory clarity and lane ownership is the gold medal winner here. Across the pond, institutional signaling weighs well in forcing cross border regulatory coordination with a quiet but big announcement today from Standard Chartered, receiving FCA approval to custody for institutional clients. This will accelerate adoption of payment infrastructure and drive uniform policy making across Europe and the US, given the policy risk and balance sheet exposure to Northern Trust.
- the BAD, - Still eyes wide open from Tuesday's Senate banking committee meeting. Deeper dive below. As uneducated as the masses are, I'd expect a little more depth and breadth from our chambers. Important to compare to China's regulatory narrative of the last few months, some parallels and lessons in there somewhere.
- and the UGLY - Jake is sounding the alarm tonight on a potential midnight snack of pork that would elevate reporting and transparency of domestic crypto assets fairly quickly here. Will likely rattle the cryptoverse near term, but could very likely accelerate legitimacy by setting a floor and bringing parity with other asset reporting after everyone catches their breath. But who knows, maybe there never really was such a thing as a decentralized exchange (doubt it though as Paradigm is deep this week announcing the TWAAM dynamic structure that helps spread large blocks a la a broker dealer desk)?
- NFTs - If the team missed it this week, The Global NFT Summit was yesterday and the NY Times continues towards epic fandom, with very good customer segmentation analysis here this week.
- SEC seems to continue to bang the drum in corralling projects to go to the FinHUB first for open and transparent support and guidance. Rhetoric, or at least mentions, are up in the press and only time will tell whether this is a backhanded self reporting funnel or getting legs as the minority of our 5 commissioners are gaining clout.
In other recent news that stuck recently, Tether's founding team seems to be less than pedigreed possibly permanently tipping the hat to USDC/DAI and accelerating attention on the Olympus DAOs of the world. Europe latching onto FATF's recommendations, which normally wouldn't be news given the US's reticence to do so in recent years, but the level of reporting would force some sort of overlap with the US.
Senate Banking Committee on Crypto from Tuesday - Quick color and comments, so please excuse typos, quick hand, and format:
- This notion of crypto at large migrating into the traditional financial systems does have some credence, and is clearly the fog in the cigar room at the end of PA Ave. This idea that there is crypto integration that inherently places drag on the traditional financial system is thick in the air.
- Clear lack of scope, before even getting to an understanding is the narrative...the pre-retail learning curve stops at the headlines. To most on the Hill or are not polar for or against, this is early internet, asset backed markets, fintech 1.0, which speaks to the abject need for education and gamification.
- Good signal that Sen. Sherrod had to shop all the way down to an unknown law school's professor to promote his agenda is a strong signal here that legitimate thought circles support the irrefutable structural shift. Remember those that testify are seated by senators pushing their own agendas.
- Alarming to be reminded that financial system transaction costs account for 8% of GDP with payments making up 1% of GDP. Disappointing that the pro-crypto testimony is not armed with these facts top of mind. We need to be all over that. These are softballs.
- Remember very simply that public ledgers ARE NOT anonymous. This is the primary attack vector of the AML and anti-terrorism camp. The real issue being that these allow for censorship resistant and immediate payment, which is ironically a testament to the value prop of cryptocurrencies at large. How can this narrative be flipped?
- CBDC race is on. Paulson thinks its a potential red herring and the Senators seemed to defer unequivocally. BUT he does nod to the need for innovation and inclusion to get to ubiquity or at least parity here. Still can't discount China's long game towards the dollar and the tool of destabilization crypto provides, regardless of which direction volatility is the end game (not article at top).
- This focus of the ever powerful Sen. Mendendez (reference these names to get familiar with) on shopkeepers to prefer their own medium of exchange but to preserve the right of all citizens to transact in cash seems noble, but feels more like a voter's olive branch, which it very much seemed to be when he plugged his Payment Choice Act proposal's Act. This will require some untangling with financial innovation or risk missing the point, which is relevant given his stature in the Senate.
- And Warren, well, don't know what to address here.
- Onramps and offramps are compliant and can remain the shiny objects - Regulators seem to understand these, and these fit most cleanly into existing regs. Regardless of the chaos thereafter, tightening the point of entry and exits is the lowest hanging fruit.
- On this topic, we absolutely need more senators that share the views of Mr. Daines from Montana, if folks can get past his policy approach at large. Cloud startup experience, he gets the pace of innovation.
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